Agreement between Mexico and USA is going on better. (refers to new rules for auto industry. Consequently, The United States governments recommended tougher rules on vehicle’s construction. Canada saw the possibility there, to for Canada to join the new discussions.
The US Dollar raised, so EUR/USD droped. US dollar is superior over emerging market currencies even as the trade wars carry on.
The currency pair dropped and stabilized between our 1.1580 resistance level and the 1.1510 support level. We could see it moving downwards to the 1.1510 support line and even breaking it moving lower towards the 1.1445 support barrier. On the other side we could see it break the 1.1580 resistance line and aim higher for the 1.1640 resistance barrier.
As per media yesterday, high level negotiations pick up again about NAFTA between the US, Canada and Mexico. US president Trump said on Monday, that he talked with Mexico about doing something very dramatic, very positive to reach a trade deal. Most sticking points continue to include car content rules, the expiration clause and Trump’s threats of tariffs on foreign cars. It should be noted that Canada and Mexico remain optimistic about reaching a deal, though an August deadline may seem too soon. Under certain circumstances, further headlines about further progress in the NAFTA negotiations could support CAD and MXN.
USD/CAD dropped yesterday, breaking consecutively the 1.3120 and the 1.3050 support lines, reflecting the strengthening of the Looney and the weakening of the USD. We could see the pair stabilizing today maybe even correcting a bit, however the pair may prove sensitive to any further headlines regarding NAFTA as well as today’s US financial releases. Should the bears be in the driver’s seat, we could see the pair breaking the 1.2985 support line, while if the bulls take over the market we could see the pair breaking the 1.3050 resistance line and aim for the 1.3120 resistance hurdle.
BoC kept its interest rate unchanged yesterday at +1.25% as was widely expected, however issued a rather hawkish accompanying statement. The statement dropped tis reference for the bank as being cautious and did not mention the NAFTA negotiations per se. The bank mentioned clearly that higher rates will be needed to keep inflation near target and that a gradual approach guided by incoming data will be taken, practically paving the way for a rate hike in the next meeting. Currently, CAD OIS imply a possibility for a rate hike of 63.56% in July. Overall, the CAD strengthened on the good news and it could strengthen even further should there be more signals for a possible rate hike in the future.
USD/CAD dropped yesterday breaking the 1.2985 and the 1.2915 support lines. We could see the pair stabilizing today and trade in a sideways manner, however financial data releases could set the pair under selling interest somewhat. Should the pair find buying orders along its path we could see it breaking the 1.2915 resistance level and aim for the 1.2985 resistance hurdle. Should it come clearly under selling interest we could see it breaking the 1.2860 support line and aim for the 1.2800 support barrier.